Class Accuses Arizona Utility of Bribery & Fraud

PHOENIX (CN) – Customers of an Arizona water utility claim in court the company’s owner bribed a state regulator for clearance to charge excessive prices.

In a federal racketeering class action filed Monday, customers of Johnson Utilities say the water utility’s owner, George Johnson, using a lobbyist as a go-between, bribed a former state regulator and his wife to “corruptly charge the public excessive prices.”

Johnson Utilities is headquartered in Scottsdale and provides water and wastewater service in central Arizona’s Pinal County.

According to the class action, Johnson planned with lobbyist Jim Norton to funnel $31,500 to former Arizona Corporation Commissioner Gary Pierce through his wife, Sherry.

In exchange for the money, Pierce introduced an amendment in 2011 to a previous decision barring Johnson Utilities from a rate increase and tax reimbursement, the class claims.

“Gary Pierce and a majority of the ACC voted – against ACC staff recommendations – to approve the amendment and grant Johnson the requested rate increase and ability to request income tax reimbursement in the future,” the lawsuit says.

To funnel the funds to Sherry Pierce, money was sent to a co-conspirator consultant that is unnamed in the indictment. The consultant opened up a separate bank account to pay Sherry Pierce, as an alleged employee of the consulting firm.

Payments were made to the Pierces from November 2011 through August 2012, the class claims.

Johnson, the Pierces, and Norton were indicted May 23 on conspiracy, bribery and fraud charges. They have all pleaded not guilty, and face trial Jan. 3.

The May indictment also claims the Pierces were in discussion of receiving a property worth $350,000 supposedly to be paid for by Johnson. It is unclear if that property was ever received.

The class includes a number of Pinal County residents who had their rates increased.

“These plaintiffs are looking forward to their opportunity to present to the court the wide array of Mr. Johnson’s misconduct, as well as the other defendants,” Jeffrey Goulder, an attorney for the class, told Courthouse News. “They’re trying to do what’s best for the entire community.”

Johnson’s actions allegedly arose after an Aug. 24, 2010, decision in which the Arizona Corporation Commission — on recommendation from its staff — rejected his request for a wastewater rate increase, and to allow Johnson to have his personal income taxes reimbursed by payments made by Johnson Utilities customers.

The original response, in which Pierce was a voting member, unanimously deemed Johnson Utilities’ request inappropriate.

“It is not appropriate or in the public interest to allow pass-through entities such as [Johnson Utilities] to recover personal income tax expenses through rates. [Johnson Utilities’] request is not reasonable and will be denied,” the commission said in its rejection.

Goulder says more people may be later added as defendants.

“Frankly Mr. Johnson has a reputation of retaliation in lawsuits where he is sued, he oftentimes will file countersuits against those that take him on,” Goulder said. “This group of citizens is willing to step up, do the right thing, and try to bring some justice to the people who have suffered these rate overcharges.”

Johnson Utilities did not respond to requests for comments before publication.

The class action seeks class certification, restitution and damages on claims of fraud and violations of the Racketeer Influenced and Corrupt Organizations Act.